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Published, Version of Record (VoR)Open Access via Drexel Libraries Read and Publish Program 2024CC BY V4.0, Open
Journal article
FinTech vs. Bank: The impact of lending technology on credit market competition
Journal of banking & finance, v 170, 107338
26 Nov 2024
Featured in Collection : Research Supported by Drexel Libraries' OA Programs
Abstract
Does the recent proliferation of technology in lending process have an impact on business loan market competition? Using a theoretical model that assumes heterogeneity in lenders’ screening abilities and borrowers’ investment horizons, we show that FinTech (Traditional) lenders primarily supply unsecured (asset-backed) loans to borrowers with short-term (long-term) projects. The model builds on the interplay between screening ability and collateral requirements to characterize the competition between two ex-ante symmetric lenders. Lenders use screening technology and collateral requirements to mitigate competition and restrict the supply of credit through an endogenous segmentation of the loan market. As information technology improves, the effect on credit supply and equilibrium interest rates becomes more nuanced and depends on the market segment. The results offer a supply-side explanation for the growth of unsecured lending.
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Details
- Title
- FinTech vs. Bank: The impact of lending technology on credit market competition
- Creators
- Konstantinos Serfes (Corresponding Author) - Drexel University, Economics (School of Economics)Kejia Wu - Federal Reserve Bank of PhiladelphiaPanagiotis Avramidis - The American College of Greece
- Publication Details
- Journal of banking & finance, v 170, 107338
- Publisher
- Elsevier
- Number of pages
- 12
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:001367915700001
- Scopus ID
- 2-s2.0-85210083930
- Other Identifier
- 991021961413304721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics